UPDATE 5-Brazil cuts rates for first time in four years to bolster recovery

miércoles 19 de octubre de 2016 18:33 GYT
 

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By Alonso Soto and Silvio Cascione

BRASILIA Oct 19 (Reuters) - Brazil cut interest rates for the first time in four years on Wednesday, opting for a modest 25 basis-point reduction to launch an easing cycle aimed at pulling Latin America's biggest economy out of its worst recession in over a century.

The central bank's nine-member monetary policy committee, known as Copom, voted unanimously to cut its benchmark Selic rate to 14 percent, signaling it will proceed with a "moderate and gradual" easing cycle.

However, the bank said in its post-decision statement that it could opt for steeper cuts in the future if the pace of disinflation accelerates and Congress presses ahead with the approval of austerity measures.

"The magnitude of monetary easing and a possible speeding up of its pace will depend on a favorable evolution of factors that allow greater confidence on meeting the inflation targets at the relevant horizon for the conduct of monetary policy," the bank said.

Lower rates will help President Michel Temer in his effort to strengthen a recovery that remains elusive with high unemployment as well as dwindling industrial and service activity frustrating hopes of a rebound later this year.

For some analysts, the central bank is signaling a longer and more aggressive rate-cutting cycle is on the horizon.

"We believe the central bank will have enough elements to step up the pace of easing to 50 basis points at its next meeting despite the caution expressed today," economists with Sao Paulo-based Haitong said in a research note.   Continuación...